The Australian financial market regulator ASIC was suspicious about the activities of the local subsidiary of FTX from at least six months before the collapse of the cryptocurrency exchange in November.

ASIC Had FTX Australia Under Surveillance

According to documents gathered by Guardian Australia, the Australian Securities and Investments Commission (ASIC) was concerned about the operations of FTX Australia, which obtained an Australian Financial Services (AFS) license by acquiring a local financial institution IFS Markets in December 2021. FTX Australia launched its services for Aussies last March.

The takeover of an existing AFS license holder allowed FTX Australia to sidestep extensive scrutiny of the regulator. ASIC suspended FTX Australia’s AFS license after Sam Bankman-Fried’s larger FTX empire collapsed.

Additionally, FTX put its Australian companies under voluntary administration and now owes around $1 million to its customers which number around 3,000.

Check out Finance Magnates' interview with Sam Bankman-Fried before the FTX collapse.

Three ASIC Notices

The documents revealed that the Aussie regulator issued a Section 912C notice to the crypto exchange last March, the same month it launched local services, asking for information about its operations. With the notice, ASIC can check if the service provided by a company satisfies the regulator’s “fit and proper person test.”

Another document confirmed that ASIC issued three notices to FTX Australia before the collapse and put it under “surveillance activity.” Moreover, the Aussie regulator was concerned about the exchange in October, weeks before Bankman-Fried’s vulnerable FTX empire was exposed.

“Since March 2022, Asic [made] enquiries with FTX Australia about the financial products offered by FTX Australia. The issues raised included pricing, FTX Australia’s compliance with ASIC’s [contract for differences] product intervention order, and its onboarding of clients,” an ASIC spokesperson told the publication.

“ASIC’s review of these matters was ongoing as at the time that external administrators were appointed to the Australian FTX entities.”

FTX and more than 130 affiliates are now undergoing insolvency in the United States. Bankman-Fired, who is now facing criminal charges, was replaced by John Ray as the CEO of FTX. Meanwhile, the bankruptcy administrators are trying to get control of $3.5 billion in cryptocurrencies belonging to FTX customers currently in control of the Bahamas financial market regulator.